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Wealth Management & Retirement Planning
Private Investment Accounts For:
Personalized Financial Plans Changing jobs, or finding yourself out of work, can make you vulnerable, both emotionally and financially. We can help you take control of the situation through the proper handling of your 401(k) or 403(b).
Your options may include:
IRAs Individual Retirement Accounts or IRAs allow you to invest a portion of your yearly earnings, tax-deferred. This means that you don’t have to pay taxes on the money earned in the account until you withdraw it. (In addition, you may be able to deduct all or part of the money you invest from your yearly income taxes). Individual retirement accounts are available to virtually any wage earner at any salary. They are funded completely by individual contributions. IRAs are usually held in an account with a bank, brokerage firm, insurance company, mutual fund company, credit union, or savings association. They provide either a lump-sum payment or periodic withdrawals upon retirement. There are two basic types of IRAs: traditional and Roth. Roth IRAs Roth IRAs are similar to traditional IRAs, but they money you contribute is taxed differently. You aren’t allowed to deduct your contributions from your yearly income taxes, but, as long as you leave the money in the account for at least five years and are 59 and ½ when you withdraw the funds. 401(k)s 401(k)s (named after the section of the tax code that deals with them) are retirement savings plans sponsored by employers. They allow you to contribute a portion of your income to an investment account. (Most contributions are made before taxes. Some plans allow you to contribute after tax income as well). You have a certain amount of discretion in choosing which investments to hold within your account. 403(b)s 403(b)s are similar to 401(k)s, but designed for employees of non-profit organizations, such as charities, colleges or churches. These employers often don’t make matching contributions. 403(b)s also sometimes allow you to make “make up” contributions if you failed to contribute the maximum amount allowed for a previous year. Most of the rules are the same as those that govern a for profit company.
Retirement Plan Information There are obviously a variety of retirement planning options that can meet your needs. Your employer may fund a plan and you may fund a plan. Bear in mind that in most cases, withdrawals made before age 59 1/2 are subject to a 10 percent penalty, and withdrawals usually must begin by April 1 of the year after you turn age 70 1/2. Income taxes are also due upon withdrawal in most cases. This list describes 10 of the most common options. A defined benefit pension normally provides a specific monthly benefit from the time you retire until you die. This monthly benefit is usually a percentage of your final salary multiplied by the number of years you’ve been with the company. Defined benefit pensions are usually funded completely by your employer. A money purchase pension provides either a lump-sum payment or a series of monthly payments. The size of this benefit depends on the size of the contributions to the plan. Your employer normally funds money purchase pension plans, although some will allow employee contributions. Your employer funds a profit-sharing plan; employee contributions are usually optional. Upon your retirement, you will normally receive your benefit as a lump sum. The company’s contributions — and thus your retirement benefit — may depend on the company’s profits. If a profit-sharing plan is set up as a 401(k) plan, employee contributions may be tax deductible. A savings plan provides a lump-sum payment upon your retirement. The employee funds savings plans, although employers may also contribute. Employees may be permitted to borrow a portion of vested benefits. If a savings plan is set up as a 401(k) plan, employee contributions may be tax deductible. Under an employee stock ownership plan (ESOP), an employer periodically contributes company stock toward an employee’s retirement plan. Upon retirement, employee stock ownership plans may provide a single payment of stock shares. Upon reaching age 55, with 10 or more years of plan participation, you must be given the option of diversifying your ESOP account up to 25 percent of the value. This option continues until age 60, at which time you have a one-time option to diversify up to 50 percent of the account. As mentioned, tax-sheltered annuities or 403(b) plans are offered by tax-exempt and educational organizations for the benefit of their employees. Upon retirement, employees have a choice of a lump sum or a series of monthly payments. These plans are funded by employee contributions, and these contributions are tax deductible. Keogh plans were specifically designed for self-employed people. They are funded completely by wage-earner contributions and provide either a lump-sum payment or periodic withdrawals upon retirement. Keogh plans have the same investment opportunities as IRAs. Contributions to Keogh plans are tax deductible within certain generous limitations. Simplified employee pensions, or SEPs, were designed for small businesses. Like IRAs, they can provide either a lump-sum payment or periodic withdrawals upon retirement. Unlike an IRA, the employer primarily funds them, although some simplified employee pensions do allow employee contributions. SEPs are usually held in the same types of accounts that hold IRAs. Employee contributions — in those SEPs that allow them — may be tax deductible. Savings Incentive Match Plans for Employees, or SIMPLE plans, were designed for small businesses. They can be set up either as IRAs or as deferred arrangements — 401(k)s. The employee funds them on a pre-tax basis, and employers are required to make matching contributions. Principal and interest grow tax deferred. Strictly speaking, annuity contracts are not qualified retirement plans. But they do provide tax-deferred growth like qualified retirement plans. They are also subject to withdrawal conditions very similar to qualified retirement plans, but there are no contribution limits. They can be used very effectively to supplement your employer-provided. If you are looking for a financial planner or investment advisor, we believe we offer sound conservative wealth management that can guide you to and through retirement. When interviewing financial advisors, we advise investors to look at the practical experience of each financial advisor of that firm in order to determine whether their background will help you manage risk appropriately. We believe that our real experience while managing money for institutions allow us to provide a level of wealth management that is rarely found in Texas. |
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